Insurance and Asset Protection for an ADU

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Hello, I hope you are doing well.

I wanted to ask a couple questions from the perspective of a CA resident.

Let's say someone owns a primary residence, and is in the process of building an ADU on that same plot of land. The ADU will have its own address and separate gas/electric meters, etc. I was wondering how an ADU is looked at in terms of insurance and asset protection?

A couple questions to help guide discussion:

1) Would the ADU be considered an "investment property" or an extension of personal primary residence?

2) Regarding insurance: would the owner then have a homeowner's policy for the original primary residence house, and then a landlord insurance policy (and subsequently landlord umbrella insurance) on the ADU? or would the ADU be added onto the primary homeowner's policy?

3) Regarding asset protection: would the ADU be eligible to be put into a land trust and then moved into an LLC?

Just wanted be prepared with action steps after the ADU gets built. I know a lot of people (especially in CA) are building ADUs to help with the housing problems. They're becoming more prevalent now so hopefully this post can help others too.

Thanks in advance and stay safe everyone!


From an Insurance perspective I can only tell you that the answers will depend on the company.  Different companies will seek to cover it in different ways:

1. Some may add it to the Homeowners policy

2. Some may extend Liability from the Homeowners but require a sepparate policy for the Building, loss of rents, etc

3. others may require it to be insured on a sepparate policy all together

For the Umbrella, check with your agent but generally, if that rental is in your name and being used for residential purposes, you should be able to add it to the umbrella.  Make sure you have the proper amount of Liability coverage on that unit (your agent for the umbella can tell you the requirements)

Lastly, make sure the Liability coverage matches the ownership on the ADU. If it is a Land Trust or LLC make sure it is a named insured on the policy.